Finance Bill

Neil Shastri-Hurst Excerpts

Committee of the whole House
Wednesday 11th December 2024 Commons Chamber

[James Murray]

I thank the hon. Gentleman for his specific question. Let me just be clear that I am not giving tax advice for that particular school in my response, because I would always assume that any school would get its own tax advice. In general, the VAT treatment of a particular supply is determined by the predominant supply, so there are options available to schools. I am happy to pick the matter up with him outside the Chamber and to make sure he has the details in writing. As I said, I would not want to give specific advice to that school, but it is worth the school getting advice on the VAT treatment of the fees it charges based on the predominant supply.

I will return to the impact of the policy we are proposing and the changes in clause 47. Government analysis suggests that the impact of the VAT policy on private and state school sectors is likely to be very small—ultimately leading, as I was saying a few moments ago, to 37,000 fewer pupils in the private sector, which includes both pupils who will never enter the private sector and those who will move.

[Dr Neil Shastri-Hurst (Solihull West and Shirley) (Con)]

A particular subset of pupils affected by this policy are those in receipt of the continuity of education allowance. The revised figures for the CEA, released recently, do not fully protect those pupils from the uplift on VAT on school fees. What assessment have the Government made of the impact of this policy on retention and recruitment into our armed forces and our diplomatic service?

[James Murray]

I thank the hon. Gentleman for raising the continuity of education allowance, because the Government greatly value the contribution of our diplomatic staff and serving personnel. The continuity of education allowance is therefore provided to ensure that the need for frequent mobility does not interfere with the education of their children. As he may know, the Ministry of Defence and the Foreign, Commonwealth and Development Office have increased the funding allocated to the continuity of education allowance, to account for the impact of any private school fee increases on the proportion of fees covered by the CEA, in line with how the allowance normally operates.

The Government have carefully considered the impacts of the policies set out in clause 47 and received a wide range of representations covering topics that have already been raised in the debate today. The Government received more than 17,000 consultation responses, and my officials and I have met those representing schools, local authorities and devolved Governments. As a result of these representations, the Government have made several changes to the legislation, including to clarify the treatment of nurseries. In deciding on the final design of the policy, we have made sure that schools are treated fairly and consistently.

A number of hon. Members have raised with me concerns about the impact of this measure on particular types of schools and on different pupils, so I am glad to have this chance to address some of those points. First, to protect pupils with special educational needs that can be met only in a private school, the local authorities and devolved Governments that fund these places will be compensated for the VAT they are charged on those pupils’ fees. Secondly, as I just mentioned in response to the intervention on military and diplomatic families, the Ministry of Defence and the Foreign Office have agreed to increase the funding allocated to the continuity of education allowance to account for the impact of private school fee increases.

The Government are aware that while many schools have always offered schemes enabling the prepayment of fees, there were concerning reports of some parents using such schemes in an attempt to avoid these fees being subject to VAT. The Government believe that allowing fees paid from the date of the July statement to the date this policy comes into force to be paid without charging VAT on them would be unfair on the vast majority of families who will be unable to pay years-worth of fees in advance. The changes made by clause 48 will therefore introduce anti-forestalling provisions that will apply to all prepayments of private school fees and boarding services on or after 29 July 2024 and before 30 October 2024. Finally, clause 49 sets out the commencement date for these changes, which will apply to any fees paid on or after 29 July 2024 relating to the term starting in January 2025.

To conclude, the reason the Government are raising funding from the changes we are debating today is to increase investment in the state education system. Every parent aspires for high-quality education for their children. The removal of the VAT exemption for private schools will help to support the Government’s investment in schools and ensure that every child has a chance to thrive. We are determined to be a Government who enable the aspirations of all parents to be met and who ensure that all children have the opportunity to succeed. I therefore commend these clauses to the Committee.

Farming and Inheritance Tax

Neil Shastri-Hurst Excerpts

Wednesday 4th December 2024 Commons Chamber

[James Murray]

I have met members of the National Farmers Union, representing the farming industry, a number of times since the Budget for detailed discussions. That has helped us to understand the impact that this policy will have and to ask for their support in communicating how it will work.

[Dr Neil Shastri-Hurst (Solihull West and Shirley) (Con)]

rose—

[James Murray]

I am going to make some progress. I am going to continue to explain how some of the other exemptions within the inheritance tax system will benefit people affected by this policy.

--- Later in debate ---

[James Murray]

When we approach policies in government we test them thoroughly and consider the details and the data, and we ensure that any conclusions we draw are based on the correct set of data, which is part of the conversation that we are having today. I do not know whether it is due to mischief or misunderstanding, but there is a certain focus on the total value of farms rather than on inheritance tax liabilities. The data on inheritance tax liabilities is the correct data to look at when evaluating the impact that the policy may have.

[Dr Shastri-Hurst]

Will the Minister give way?

[James Murray]

I am going to make some progress.

As I said earlier, a farm worth £5 million but owned by five relatives in equal shares could have no inheritance tax liability.

--- Later in debate ---

[James Murray]

I note that the hon. Gentleman’s grasp of economics is about as good as Liz Truss’s was. As I have said, the importance of the claims data is that it tells us what the inheritance tax liability will be. I understand that Members are referring to many other sources and sets of data, but when we are looking at the impact of a change in inheritance tax relief, it is claims data that tells us what that is likely to be.

[Dr Shastri-Hurst]

Will the Minister give way?

[James Murray]

I am going to make some progress. I have given way many times already.

Looking at the HMRC data, which relates to estates making claims for agricultural and business property relief, is the correct way to understand inheritance tax liabilities. That data shows that our reforms are expected to result in up to 520 estates claiming agricultural property relief, including those that also claim business property relief, paying some more inheritance tax in 2026-27. Let me put that in context. It means that nearly three quarters of estates claiming agricultural property relief, including those that also claim business property relief, will not pay any more tax as a result of these measures.

As this change is introduced, we expect people to respond in a number of ways to reduce their inheritance tax liabilities, and the costings by the Office for Budget Responsibility assume that that will be the case. People may change ownership structures, plan for their succession differently, and make greater use of gifting provisions and insurance.

--- Later in debate ---

[Jon Pearce]

I will not take any more interventions at the moment. Before the Budget, I sat down with farmers in my constituency. They wanted to talk about two things. First, they were concerned about the effect of the changes to APR on family farms.

[Dr Shastri-Hurst]

Will the hon. Gentleman give way?

[Jon Pearce]

No, I will not. Secondly, they were concerned about cuts to the farming budget. The Chancellor delivered £5 billion for the farming budget, the largest ever investment in sustainable food production and nature recovery, and she delivered in terms of protecting family farms in my constituency.

[Dr Shastri-Hurst]

Will the hon. Gentleman give way?

[Jon Pearce]

No, I will not give way at this stage. Let us be clear: only 4% of estates in this country pay inheritance tax. As we have repeatedly heard, these changes will mean that a couple will be able to leave £3 million-worth of estate to their children without paying a penny in inheritance tax. To put that in context, if a couple owned a £3 million mansion, they would be paying £940,000 in inheritance tax.

--- Later in debate ---

[Joe Morris]

When we start a new job and find that the previous person in that job had not paid invoices for the previous year and deliberately withheld financial information, we have an honest conversation with the public about what is achievable. In any business, we have to be honest with people about deliverables. [Interruption.] Well, ultimately people in my constituency were sick of the chaos. They were sick of seeing Liz Truss plastered all over the newspapers.

When I speak to my farmers, I hear a real cry for security and genuine forward-planning from a DEFRA that listens and is not turned into a political football, as it was too often by the Conservatives. I know, having grown up in a rural community alongside the children of farmers, that they value roads that are not full of potholes, a stable economy and libraries that are not falling down—exactly the public services that every one of us expects.

[Dr Shastri-Hurst]

Will the hon. Gentleman set out how many farmers he has spoken to since the Budget and, of those, how many support the Government’s policy?

[Joe Morris]

The hon. Member is welcome to come and take a look at my diary at some point. On the Saturday after the Budget, I went to a farm. On the second Saturday after the Budget, I went to a farm. I then met with NFU members at my office in London. Believe me: Labour Members work their constituencies a lot harder than Tory Members.

Finance Bill

Neil Shastri-Hurst Excerpts

2nd reading
Wednesday 27th November 2024 Commons Chamber

[Dr Neil Shastri-Hurst (Solihull West and Shirley) (Con)]

May I start by congratulating the hon. Member for South Derbyshire (Samantha Niblett) on her excellent maiden speech? Not only will her daughter have been inspired by her words, but so too will countless other young women.

I must declare a personal financial interest in relation to independent school fees. I want to start by telling a story of aspiration, sacrifice and hard work. This story was told to me by a parent who is going into Christmas feeling devastated. They have worked tirelessly, missing valuable time with their child, and sacrificing holidays and any form of luxury because of an aspiration to give their child an education that otherwise would have been out of reach. This parent said to me, “I am not a rich person; I hustle every day to make the money I need to send my child to this school.” This parent will now see all those sacrifices come to nothing, as her child faces the upheaval of moving schools in the middle of the academic year.

Let us imagine that child’s first day in their new state school, their school year having been disrupted, and their efforts to catch up on the missed learning as a consequence of being forced to change schools part way through the academic year. They join 35,000 other students across the country who are expected to do the same as a consequence of this policy. Their classroom sizes swell as the promise of 6,500 new teachers remains years away from becoming a reality, and the school struggles to stretch its existing budget to accommodate the new intake. There are not enough textbooks, computers or teachers.

Let us imagine the child with special educational needs and disabilities. Their routine having been overhauled, they start to fall behind in their class. Despite the very best efforts of their teachers, who want to provide the extra support so desperately needed, they simply do not have the bandwidth. The consequences of that are children’s future prospects slipping through their fingers every day, because the school they now attend has not been adequately resourced for the arrival of them and their fellow new classmates.

Imagine being the parents of these children. They are not rich; they just want the best for their child. As a consequence of one ill-conceived, ideologically driven policy, that dream has been snatched away, with no consideration of the impact it will have on families, on schools and on teachers, who will be left redundant.

While the Government speak of a hope to bring aspiration to all, their policy to charge VAT on independent school fees will do the precise opposite. It will not deliver high standards across the board. This is not a policy that lifts up; on the contrary, it will deliver the worst for all children. It is the very definition of levelling down.

A Government cannot be expected to get things right all the time, but it is not unreasonable to expect a Government to recognise when they have got something wrong. It is not unreasonable to expect a Government to hold up their hands and to pause, reflect and recalibrate. If the Government’s true endeavour is to bring about policies for positive change, they must be willing to recognise when they need to change course, and this is that moment. I ask the Government to demonstrate some moral courage, admit that they have erred and abandon this policy of folly.

Independent Schools: VAT and Business Rates Exemptions

Neil Shastri-Hurst Excerpts

Tuesday 8th October 2024 Westminster Hall

[Dr Neil Shastri-Hurst (Solihull West and Shirley) (Con)]

It is a pleasure to serve under your chairmanship, Dame Caroline. At the outset, I must declare a personal financial interest in relation to this issue. There is a multiplicity of reasons why the Government plan to impose a 20% VAT levy on private education is a fundamentally poor choice. It plays to the idle trope that independent schools are the preserve of the privileged and the wealthy when, as many of my own constituents will attest, that is simply not the case. It is a policy that lacks nuance in its pursuit of an ideological desire to level down rather than lift up the standard of education across the board.

The detrimental effect of this ill-conceived policy is nowhere better illustrated than in the cohort of pupils whose parents are in receipt of continuity of education allowance. CEA is critical for military and diplomatic service families, who need boarding schools to provide a stable education. A societal and moral contract exists between the state and our military, a golden thread that runs through our society and binds the two together. The Government’s proposals threaten not just to shake that bond, but to break it. To date, the Government have provided no assurances that the policy will exempt those service families in receipt of CEA. Combine with that the rushed decision to implement the plan by January 2025, and it is little wonder that service families are deeply distressed by the ongoing uncertainty. 

If the Government fail to grip the situation, the cost of a suitable education for many armed forces children will become unaffordable. Many parents will be forced to withdraw their children from the school they currently attend and, in the worst-case scenario, many will make the decision that service life is no longer compatible with their family and leave, risking our national security.

By failing to act with competence, the Government are failing to uphold the contract between the state and our armed forces. My request to the Minister is to provide the service community with reassurances that they will not be left high and dry.